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Tuesday, May 8, 2018

Guest Post - Self-Employed Tax Statistics by the Numbers

Here is a guest post from Danielle Higley,* TSheets by QuickBooks with some interesting data on self-employed individuals.

Filing taxes is no simple task, especially for self-employed workers. In fact, according to a recent study by QuickBooks Self-Employed, it’s one of their top five struggles!

When asked to name the toughest part about taxes, 30 percent cited “filing the forms correctly,” 30 percent listed “filling out the paperwork,” 32 percent said “estimating how much tax to pay,” and 20 percent said “saving enough money for taxes.” The final 17 percent reported it was difficult to find deductions they could take.

As for how they file their taxes, interestingly enough, the results are basically split three ways: A third use tax filing software, a third go through an accountant, and a third still file using paper.

The most common reason for self-employed workers to use an accountant is they’ve never done their taxes before and they don’t want to start. Around 1 in 5 say they use an accountant because filing themselves takes too much time, while 17 percent say they’ve attempted to do their own taxes in the past but failed, so they prefer to use an accountant.

Hiring an accountant to ensure taxes are done correctly is smart, especially when 36 percent of self-employed workers report having been audited by the IRS. That’s extraordinarily high compared to the .7 percent of total taxpayers audited in 2016 (according to CNBC). Even individuals who make over $1 million a year are less likely to have their returns audited — sitting at just over 5.8 percent.

Young taxpayers are among those most likely to be audited. According to the survey, 11 percent of people aged 54 and up have been audited, compared to 46 percent of those aged 18-24.

Another reason is it’s incredibly easy for a self-employed worker to get behind on their taxes. Forty-two percent underestimate how much they’re supposed to pay, while 30 percent aren’t able to afford their taxes. Interestingly, 32 percent were either unaware they needed to pay taxes or forgot to pay them, while 10 percent said they didn’t know how.

In the end, 36 percent of self-employed workers say they don’t pay any taxes — 17 percent said it was because they don’t make enough money, 10 percent said it was because their losses exceed their profits, and 9 percent gave no reason.

Around 30 percent of self-employed workers say they don’t report all their income — including 6 percent who say they don’t report any. Part-time self-employed workers are actually twice as likely to underreport their income.

One sign that many folks find taxes confusing is 1 in 10 self-employed workers surveyed didn’t know about the country’s most recent tax reform. Of those who were aware of it,  a third said they expect to pay more in 2018, while half that said they expect to pay less. Regardless, when asked what area of taxes they want to learn more about, the No. 1 response for self-employed workers was anything and everything tax-related.

What do you think?


*Danielle Higley is a copywriter for TSheets by QuickBooks, a time tracking and scheduling solution. She has a BA in English literature and has spent her career writing and editing marketing materials for small businesses. Last year, she started an editorial consulting company.



5 comments:

Jon Sigurdsson said...

Thanks for this!
It's a hassle for self-employed to pay taxes

Small Business Tax

Anonymous said...

If Companies tell us more, Trading will be less worst. Have Equity Tips

Cash Balance Plans said...

Nice to see a few areas with low tax rates. People get excited about no state income tax in Texas but then they see the property taxes. I see clients move to the Midwest or Northeast and they get sticker shock.

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Jessica Mathew said...

This is very informative post
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